OPINION | Could a weakened OPEC hurt the US and its oil industry?

Cushioning the blow

OPEC has long played a central role in stabilising oil markets, using large volumes of low-cost spare capacity, mostly concentrated in the gulf, to cushion the impact of wars and weather events.

It also proved effective in times of oversupply, most notably during the onset of the COVID-19 pandemic.

Trump personally urged Saudi Crown Prince Mohammed bin Salman in April 2020 to slash output and ease pressure on US producers. Within days, OPEC+ announced its largest-ever production cut.

Without effective market management by OPEC, oil markets face higher volatility and fewer shock absorbers to deal with disruptions that are likely to become more frequent as geopolitical tensions rise. For producing nations, including the US, this would likely translate into more frequent boom-and-bust cycles, higher operating costs for oil companies and, ultimately, higher and more volatile prices at the pump.